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1. Suppose that a rise in income from P60,000 to P70,000 leads to an increase in consumption from P47,000 to P54,000.
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- If mpc = 0.8 and the additional income is P12,000, how much is the additional consumption? How much is the additional savings? show the computationsYd Consumption Expenditure $ 0 $ 6,000 $ 10,000 $ 14,000 $ 20,000 $ 22,000 $ 30,000 $ 30,000 $ 40,000 $ 38,000 $ 50,000 $ 46,000 Determine break even level of income Determine autonomous consumption If your income level were $30,000, how much would you save? Calculate MPC, MPS, and Multiplier How much equilibrium level of income will increase by if autonomous Investment of $4,000 was made?Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. Consumption and the multiplier: Show how to derive an IS curve that includes the consumption multiplier. That is show how to derive equation (11.16(below)). Draw a graph of the original IS curve and the IS curve that includes the multiplier. Which one is flatter and why? (11.16) Y~=[1/(1-x-bar)] x [a-bar - b-bar(Rt - r-bar)] ^multiplier ^original IS curve
- 16. Suppose that planned investment and planned government purchases do not depend on income:I = 15 and G = 17. Consumption, as you would expect, does depend on income via the consumption function C = 2 + 0.75Y – 0.75T. Net taxes are T = 12. Your friend thinks that the equilibrium will be where Y = 150 but he is wrong. What is the best description of this situation? a. the (Y, AE) point is above the 45 degree line, Y will adjust down b. the (Y, AE) point is above the 45 degree line, Y will adjust up c. the (Y, AE) point is below the 45 degree line, Y will adjust down d. the (Y, AE) point is below the 45 degree line, Y will adjust up 17. (continued) Help you friend by calculating the equilibrium income for the AE model in the previous question. Y = _____12. Given this diagram of Consumption and Savings functions, What will be the level of savings at an income level of 60? 6. Given this diagram of Consumption and Savings functions, What will be the level of savings at an income level of 20? 07. Given this diagram of Consumption and Savings functions, What is the level of total desired consumption at income level of 80? 8. Given this diagram of Consumption and Savings functions, What is the level of "induced consumption" at income level of 407 Consider a model in which an individual lives only two periods. This person has diminishing marginal utility of consumption and receives an income of $20,000 in period 1 and an income of $5,000 in period 2. The private interest rate is 10 percent per period, and this person can borrow or lend money at this rate. Also assume that this person intends to consume all of his income over his lifetime. a. Give a hypothetical numerical example of what a person’s optimal consumption would be over these two periods. In answering this question, what assumptions did you make?
- 1. Suppose your annual income is $82,000 this year and it is expected to increase 25% next year. The market interest rate is 3%. a. Please illustrate all possible consumption patterns with a figure. Do not forget to label your axes. b. You believe that your consumption this year and your consumption next year should be the same. If you follow your plan and consume equally in those two years, how much should you save or borrow this year?Macroeconomics Question No.2 Suppose the consumption function is given by C = 100 + 0.8YD and that I = 50, while G=200, TR=62.5 and t=0.25. What is the equilibrium level of income? What is the level of saving in equilibrium? If investment were to rise to 150, what would be the effect be on equilibrium income. What is the value of multiplier in part a. and c. Draw a diagram indicating the equilibrium in part a. and c.For an economy the following functions have been given:C = 100 + 0.8YS = -100 + 0.2YI = 120 – 5rMs = 120Md = 0.2Y – 5rCalculate the following:5.1.1. IS equation 5.1.2. LM equation 5.1.3. Equilibrium level of income 5.1.4. Equilibrium level of interest rate. 5.1.5 Calculate National saving. 5.1.6 Calculate money demand 5.1.7 Find consumption
- ADVANCED ANALYSIS Suppose that the linear equation for consumption in a hypothetical economy is C = 60 + 0.75Y. Also suppose that income (Y) is $600. Determine the following values: Instructions: For parts a, b, d, and f, round your answers to 2 decimal places if necessary. For parts c and e, enter your answers as a whole number. a. MPC = b. MPS = c. Level of consumption = $ d. APC = e. Level of saving = $ f. APS =6. Is the relationship between changes in spending and changes in real GDP in the multiplier effect a direct (positive) relationship or is it an inverse (negative) relationship? How does the size of the multiplier relate to the size of the MPC? The MPS? What is the logic of the multiplier-MPC relationship?5 3. permanent Income Hypothesis a) suppose that beta=.9 and R= 2222 (that is ~22%). For an individual who acts according to the PIH, will their consumption next period be higher than current consumption or lower? b) What is the main crucial difference between the Keynesian Consumption function and the consumption function derived from the PIH (or Lifetime Income Hypothesis)? c) If Present Value of future income stream is 500,000 and a person has a beta of.8, how much will their consumption go up today if only today's income increases by 1000? How much will their consumption increase (approximately) if their income goes up by 1000 in all periods?
